The European Central Bank and other EU central banks are urging Brussels to change how stablecoin reserves are managed under the Markets in Crypto-Assets Regulation, arguing that the current deposit requirement could create risks for the banking system during periods of heavy redemptions.

In a submission to the European Commission’s review of MiCA, the European System of Central Banks proposed removing the rule that requires stablecoin issuers to keep part of their reserves in bank deposits. The group wants that framework replaced with liquidity standards based on how quickly reserve assets can be converted or mature.

Challenge to MiCA’s deposit rule

Under MiCA, issuers must hold at least 30% of reserves as bank deposits, with the threshold rising to 60% for significant stablecoins. The ESCB said those minimums should be scrapped.

According to the central banks, the problem is structural: forcing issuers to place large portions of reserves with banks creates a direct connection between stablecoin firms and credit institutions. In the ESCB’s view, that link could become a source of stress if token holders rush to redeem and issuers need to pull deposits back quickly.

Liquidity targets instead of fixed deposits

As an alternative, the ESCB backed minimum liquidity thresholds tied to assets maturing within one and five working days, rather than a fixed share of reserves parked in bank accounts.

The response also pointed to other instruments that could help issuers meet short-term liquidity needs, including overnight reverse repurchase agreements and short-dated sovereign bonds. The idea is to focus reserve quality and maturity rather than mandating a specific banking exposure.

Reference to earlier EBA standards

The central banks’ position aligns with liquidity metrics that appeared in draft rules published by the European Banking Authority in 2024. Those draft standards would require significant stablecoins to hold at least 40% of reserves in assets maturing within one working day and 60% within five working days.

For non-significant tokens, the draft thresholds cited by the ESCB are 20% within one working day and 30% within five working days. The submission did not present these figures as final law, but as a model for a revised reserve framework under MiCA.

Broader enforcement concerns

Beyond reserve design, the ESCB said MiCA still faces what it called material challenges in enforcement. The central banks warned that crypto firms that do not comply with the regulation may still be able to reach customers in the European Union despite the bloc’s licensing system.

That means the debate is not limited to how reserves should be structured. It also extends to whether the EU can effectively police access to its market under the regime now being reviewed by the European Commission.

What comes next

The proposal is part of the European Commission’s review process for MiCA, rather than an immediate rule change. For now, the confirmed next step is the Commission’s consideration of responses such as the ESCB’s as it evaluates whether the stablecoin framework should be amended.

The core issue raised by the central banks is whether reserve rules should prioritize deposits at banks or fast access to liquid assets in a redemption event. That question now sits at the center of the latest push to revise the EU’s stablecoin rulebook.

Source: cointelegraph.com